LaSalle Bakery and Joe Marzilli’s Old Canteen are two favorite places for Providence residents to get a bite to eat – though the food might be cheaper if the eateries paid property taxes in Cranston, Warwick or Smithfield.
With the Providence City Council giving its final OK on Monday to Mayor Angel Taveras’s proposal to freeze the commercial-property tax rate at the highest level in any major American city, a recent report the council commissioned offers some examples of how Providence’s high taxes impact familiar local businesses.
The 41-page report by the nine-member Commission on Revenue Sustainability and Effectiveness took a look at how Providence’s commercial tax rate – which will stay at $36.75 per $1,000 of assessed value in 2013-14 – compares with those of its surrounding towns. Take a look:
At the high end, One Citizens Plaza pays Providence $1.38 million annually, $238,204 more than it would in Cranston and $782,778 more than it would in Smithfield. At the low end, LaSalle Bakery pays Providence $14,005 a year, $2,423 more than it would in Cranston and $7,965 more than it would in Smithfield.
“With a higher property tax burden, businesses pay a heavy premium to be located in Providence,” the report noted. “In some instances, this higher tax burden is unavoidable because Providence location is an important factor to the success of the business.” (The Old Canteen might get fewer patrons in Smithfield than it does on Federal Hill.) “In other cases, Providence’s commercial tax burden is an obstacle to locating in the city.”
Mayor Taveras has said repeatedly he thinks the tax rate in Providence should be lowered, not just frozen, but he’s also indicated he can’t find enough savings to offset the loss of revenue.
The tax commission ran into a similar problem. Its report proposed revamping Providence’s tax structure to set the commercial property rate at twice the owner-occupied residential rate, but acknowledged that the city would lose $35 million to $40 million in annual revenue, or about 6% of the city’s $663-million proposed 2013-14 budget, if the change was made without increasing homeowners’ taxes.
“Providence has an extremely liberal owner-occupied homestead exemption (50%) in comparison to other municipalities in Rhode Island and the region,” the report said. “As a result, it is extremely difficult to reverse history and identify property tax restructuring alternatives that improves Providence’s economic competitiveness and balances the property tax system without shifting an additional burden to homeowners.”
• Related: Study: Providence commercial tax rates highest in the US (May 10)